While we all, mostly, have a healthy distain for the shorters, has anybody considered the shorter's partner, the lender.
Why would a share holder lend their shares to somebody who is betting that the share price will go down. And at what point does the lender call the shares back.
Maybe the lender sees a good long-term future for the company and so doesn't mind lending a few shares out in the short term. The lender will make a little money from whatever rate they charge for the loan, and they get the shares back at some point, so there's no real downside.
Maybe the lender owns the shares on behalf of somebody else, like in a support fund. Again no big deal to loan out a few and make a bit of money on the side.
I'm sure there are plenty of other scenarios where a lender can oblige a shorter.
But, what happens when the shorters are deliberately trying to force the share price down by excessive selling. What roll does the lender play here.
If the lender is an innocent party they will see the share price go down beyond what they think is reasonable fair value, then what do they do. Call the shares back, I'd guess, and in doing so will raise the share price just a bit. Then the lender might sell some or all their portfolio for fear the price will fall further, which will achieve exactly that, a fall. Big win for the shorters. Kind of like a stop-loss hunt on steroids.
And then what if the lender is not so innocent and wants the price to decline. This is where I think it gets real murky and there are too many possibility to cover. One would assume that a lender with a bundle of shares would only lend them out for the purposes of seeing the price and their portfolio drop in value if there was a bigger gain to be made when the loan is part of a much larger transaction designed to achieve some higher end goal.
With this in mind, we have our favourite shorting whipping boy borrowing shares from lots and lots of lenders, evidenced by some recent becoming/ceasing substantial ann's, some lenders having rather large holdings. And there's no doubt that our favourite whipping boy is not the only large-scale shorter out there.
Putting aside shorter motives, what are the motives of the lenders? Are they happy-long-term'ers or proxy-owners who don't mind lending share, innocent's or malevolents? I can't work it out.
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